Scam brokers are organizations that offer their intermediary services to experienced and novice traders. It is not always possible to immediately understand the fraudulent actions of a firm. Therefore, investors often fall into a financial trap.
If fraudsters are not identified in time, the result will be the same – the complete loss of all investments. Fake brokerage companies use all possible means to swindle their clients for large sums, take them into their accounts, and disappear.
How to distinguish a scam broker
A financial intermediary that at first glance seems reliable and safe may turn out to be a real crook. It is not recommended to open a trading account on a platform with beautiful advertising and promising cooperation terms. How can an investor independently distinguish a scam broker from a reputable firm?
Several obvious signs reveal crooks. The main thing is to thoroughly analyze the financial intermediary's platform. Important point – the absence of a licensing agreement. This document must be present as it indicates that the company provides brokerage services in accordance with current legal standards.
The second point is the registration of the main office. Fraudulent organizations usually indicate their location in an offshore jurisdiction. Before entering into a cooperation agreement, it is essential to verify the address where the financial intermediary is registered. Often the stated registration address is fake or belongs to a completely different organization.
The absence of a well-developed official website is also a sign of a fake broker. There are services that are completely closed to investors. Such platforms should not be trusted 100%. Reliable brokers do not hide trading conditions, contact details, legal documents, and other features. Promises of high earnings are another trick of fraudsters. When a brokerage firm guarantees 30% or more profit in a short period (a week, a month), one should be wary.
Criminals always impose brokerage services, but reliable companies do not do this. If a company is actively advertising, representatives call and offer to invest on their platform – these are the actions of real swindlers in the financial markets.
Signs of fraudulent brokers
There are situations when the scam broker's fraud is revealed after registration in the project and investment of money.
One can identify 5 main actions and signs of fraudulent financial intermediaries:
- The firm begins to demand the trader's login and password for the trading account. Crooks invent various reasons for this;
- Constant persuasion to deposit more money. Fraudsters may motivate this by claiming that a very profitable deal is coming up. In addition, criminal brokers often require payment of additional taxes, commissions, or insurance;
- Fake oversight by regulatory bodies. The firm may claim that its activities are controlled by authoritative regulators. It is crucial to check the broker on the regulatory bodies' websites with which you plan to cooperate;
- Paid subscription to trading signals. This is another way to extract more money from the trader. All signals from deceitful investment brokers are fake. They only lead to draining the deposit;
- Lies about the founding date. Crooks often exaggerate their age and talk about several years of operation. In fact, they have been active for only a few months or days. Therefore, it is recommended to check the domain name registration.
Additionally, fraudsters often have errors in the web resource interface, which is unacceptable for reliable brokerage firms.
Reviews of scam brokers
Before opening an account on a certain broker's platform, it is necessary to study reviews about it. But it is important to be attentive and filter comments from other traders.
If all reviews are exclusively positive without any nuances – this is not true. No single brokerage organization can be perfect. Such feedback is written by imposters to make users believe and immediately invest a significant amount.
How to protect yourself from scam brokers
Detailed monitoring of information about the financial intermediary will help protect your money from real fraudsters.
Do not believe promises of high profits, and also create a strong password for your account. Never disclose your trading account details. The most optimal would be to enable two-factor authentication.
Deceitful investment brokers always act very cunningly and use all sorts of manipulations to deceive traders. Therefore, always take the time to study not only the legal information but also the trading conditions offered by financial intermediaries in detail. An hour of attentiveness can save you from significant financial losses.